THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[04:30:02] CHRISTINE ROMANS, CNN ANCHOR: And the breaking news this morning, ISIS now claiming responsibility for that terror attack.

Welcome back to EARLY START this morning. I'm Christine Romans.

JOHN BERMAN, CNN ANCHOR: I'm John Berman. Nice to see you. 30 minutes past the hour right now. This morning President-elect Donald Trump has a secret. He's back in New York City for the first time in two weeks following a vacation at his Mar-a-Lago resort in Florida where he said he knows things the rest of us don't when it comes to the alleged Russian hacking into the U.S. election.

With 18 days before the Inauguration Day, his team is promising to get to work fast reversing many of President Obama's policies. This was his spokesman Sean Spicer.

(BEGIN VIDEO CLIP)

SEAN SPICER, WHITE HOUSE PRESS SECRETARY-DESIGNATE: On day one, he's going to sign a series of executive order to do two things. One is to repeal a lot of the regulations and actions that have been taken by this administration over the last eight years that have hampered both economic growth and job creation.

And then, secondly, do the same on a forward-thinking thing. He's going to start implementing things. He's going to bring a new brand to Washington. He's going to institute a lobbying ban, five years. It's very forward-thinking.

(END VIDEO CLIP)

BERMAN: Now Sean Spicer did not specify exactly which executive actions and regulations that a President Trump will repeal. One of the big questions this morning is what Mr. Trump will or will not do regarding Russian hacking. Will he keep the Obama administration's new sanctions in place? Well, that might depend on his secret information.

CNN's Ryan Nobles has the latest from -- well, CNN's Ryan Nobles has the latest.

RYAN NOBLES, CNN CORRESPONDENT: John and Christine, President-elect Donald Trump will have a busy start to the new year. This week will be filled with meetings at Trump Tower, including a high-level intelligence briefing where the president-elect is expected to learn more about the alleged Russian hack of U.S. interests.

Now Trump continues to downplay the significance of the intelligence community's conclusion that the Russian government is behind the hack. This, despite statements from members of Congress, both Republican and Democrat, who've been briefed on the matter and described the evidence as overwhelming.

During his posh New Year's Eve gathering at his Mar-a-Lago estate, Trump told reporters that he remains skeptical of their overall assessment.

(BEGIN VIDEO CLIP)

DONALD TRUMP (R), PRESIDENT-ELECT: Well, I just want them to be sure because it's a pretty serious charge and I want them to be sure. And if you look at the weapons of mass destruction that was a disaster and they were off, and so I want them to be sure. I think it's unfair if they don't know and I know a lot about hacking and hacking is a very hard thing to prove, so it could be somebody else. And I also know things that other people don't know and so they cannot be sure of the situation.

UNIDENTIFIED REPORTER: What do you know that other people don't know?

TRUMP: You'll find out on Tuesday or Wednesday.

(END VIDEO CLIP)

NOBLES: Now in addition to Trump's private intelligence briefing, we could learn more about this alleged hack during a highly anticipated hearing of the Senate Armed Services Committee. Republican John McCain, who has a much different view than the president-elect of the alleged hack, called for the briefing.

Meanwhile, Trump has just three weeks to go to round out his staff and there's a few major Cabinet positions still open, including the secretary of Veterans Affairs and the secretary of Agriculture -- John and Christine.

ROMANS: All right. Thanks for that, Ryan Nobles, in Washington.

Overnight 35 Russian diplomats expelled by the United States landed back in Moscow. That's according to Russian state media. The administration ordered those diplomats and their families to leave in retaliation for Russia's cyber meddling in the election.

BERMAN: Tomorrow the nation's 115th Congress will gavel into session with Republicans firmly in control. Leaders, they are vowing that they're going to get to work very quickly to roll back Obamacare.

Democrats are trying to figure out a way to fight back. That includes the nation's current senior Democrat, President Obama, who will visit Capitol Hill on Wednesday for a rare joint meeting with Democrats from both the House and the Senate. They're going to try to create whatever protections they can for his signature health plan.

Donald Trump was asked about these meetings over the weekend.

(BEGIN VIDEO CLIP)

TRUMP: Well, he's president until January 20th. And then after that, it's our turn. So we'll see what happens. I mean, he's got to protect what he wants to do and perhaps you can say his legacy. But you know, if you look at Obamacare where you have, in many cases, over 100 percent increases, it's unaffordable. It doesn't work. Bill Clinton said it. Maybe he shouldn't have said it during the campaign. But he said it. It is unaffordable. It doesn't work. And it's been crazy.

(END VIDEO CLIP)

ROMANS: President Obama celebrated the new year with a series of tweets framing his legacy as he sees it. The president touting job growth, access to health care, moves toward green energy, fewer troops overseas and the legalization of same-sex marriage.

President Obama concluded with this tweet, "It's been the privilege of my life to serve as your president. I look forward to standing with you as a citizen. Happy New Year, everybody."

BERMAN: This morning, Senate Democrats are promising confirmation battles for some of President-elect Trump's nominees. They complain that some nominees including Secretary of State pick Rex Tillerson have not submitted certain materials including financial information that Democrats want to see before hearings. Some Democrats also say that attorney general nominee Jeff Sessions has omitted years of media interviews, speeches and materials from the tens of thousands of pages he submitted for confirmation.

[04:35:07] Some Democrats are calling for the January 10th confirmation hearing to be delayed. Doubtful that any of that will happen.

In the House, Republicans are set to condemn the Obama administration's handling of a U.N. vote on Israeli settlements in the West Bank. House Democrats are set to fight a Republican-backed rule change which will fine members who break certain rules of decorum including streaming live video of protests on the House floor. Democrats did that last year.

ROMANS: All right. Time for an EARLY START on your money this morning. Happy new year, everybody. Global markets are closed today for the holiday. The question on Wall Street this week, will last year's rally continue into 2017? Stocks had a memorable run last year. The market recovered from one of the worst ever starts through the year to just banged through a series of record highs.

The Nasdaq, the S&P, the Dow all had solid gains for the year. The Dow gained more than 13 percent gains. It never cracked that elusive 20,000 mark. But what a year with the bull market on track to turn eight years old in March. Many wonder if the so-called Trump rally has gotten ahead of itself. Right now investors are giddy over Trump's stimulus plan such tax cuts. Other worry that it's hype. Other concerns protectionist policies could inspire trade wars and the possibility of unexpected geopolitical events. There's always that out there on the horizon.

We're not quite done with 2016 yet, though. The final jobs report for the year will be released on Friday.

BERMAN: Breaking news this morning. ISIS has just claimed responsibility for the terror attack on an Istanbul nightclub. This attack killed at least 39 people. It injured nearly 70 more, including one American identified overnight by the State Department as William Jacob Raak. An international manhunt is under way this morning for the attacker still unidentified at this point.

CNN's Ian Lee is live in Istanbul with the latest. Ian, let's start with this new claim of responsibility.

IAN LEE, CNN CORRESPONDENT: Well, John, this attack were the hallmarks of an ISIS attack. Now we're hearing from the group on Twitter. Allegedly they are saying that ISIS -- one of their soldiers carried out the attack on the most popular nightclubs while Christians were celebrating their holiday.

It's important to note that many of the victims were Muslims who are celebrating the new year. They also said that the government of Turkey should know that the blood of Muslims who get killed by Turkey planes and artillery will set on fire inside their country. Now this is referencing Turkey's ongoing battle against ISIS in neighboring Syria.

It's important to note that we can't independently verify this claim as well as ISIS hasn't provided any details, any evidence of that they were behind this attack. But right now there is a nationwide manhunt under way. We've heard from the prime minister who says that he is certain that they will catch him soon. Also that there is strong coordination with the security forces. But I think if this person is an ISIS operative, it's likely that he might try to slip back into Syria. So it really is a ticking clock in trying to find him.

BERMAN: Ian, I've heard this nightclub described as one of the most popular nightclubs in Istanbul. Certainly perhaps with Western people or people from all different countries.

LEE: That's right. It was a symbol of cosmopolitan Istanbul. You would see actors there, you would see singers, athletes, as well as the well-to-do. It's a place to see and be seen, which makes it a target for groups like ISIS to carry out their terror attacks. You know, there was a heavy security presence in the lead-up to New Year's Eve celebrations. We were searched by the police in Istanbul's Taksim Square just to give you an idea of how tight security was leading up to this.

Also there was a police station about 250 yards down the road from this nightclub. A officer out front. Even with all that tight security, this gunman was able to get into that club to kill 39 people and then slip away. BERMAN: And Ian, this has been a period of upheaval inside Turkey.

Just weeks ago the Russian ambassador to Turkey assassinated. Over the summer a coup, an attempted coup in that country. It seems like an extremely unsettled time there.

LEE: That's right. There's been a number of attacks, and not just by ISIS, There have also been attacks by the Kurdish militants, the PKK, both sides have killed dozens of people, although the PKK mainly targets the police, the military, security services while ISIS goes after softer targets and civilians. But this is a country that is in the grips of terror attacks. And so the government here is trying to -- just trying to show confidence to the people and reassure them that they're on top of it. But at the same time, people are wondering, you know, after a year and a half with so many deadly attacks, can the government really provide security for the people in this country and a lot of tourists, this country relies on tourism, are wondering that same thing.

[04:40:11] BERMAN: All right. Ian Lee for us in Istanbul this morning where there are those breaking developments. Thanks so much, Ian.

ROMANS: All right, 40 minutes past the hour right now. A health scare for Queen Elizabeth. She misses her second holiday church service in a row. We're going to give you an update on the 90-year- old queen's health. That's next.

(COMMERCIAL BREAK)

ROMANS: Welcome back to EARLY START. This morning, new health concerns for Queen Elizabeth. She did not attend the traditional New Year's church service citing a heavy cold which had forced her to miss Christmas services as well. Despite her absence, a royal source told CNN the 90-year-old queen is up and working.

CNN's Phil Black is live outside Buckingham Palace with the very latest. Good morning, Phil. What can you tell us?

PHIL BLACK, CNN INTERNATIONAL CORRESPONDENT: Good morning, Christine. The word from Buckingham Palace is don't worry. It is just a cold. And the Queen is recovering. But it must be a terrible cold. And we can only assume that the Queen has been feeling awful because it has stopped her from doing stuff that she normally takes very seriously. And that is getting to church over the holiday period.

She missed out on Christmas Day. The first time she hasn't attended a Christmas church service in almost three decades. And she missed the New Year's service again yesterday. We'll be looking ahead to next week to see whether she attends that particular church service.

[04:45:06] This is a big deal to the Queen because she is technically the head of the Church of England. It is a position and a responsibility that we are told repeatedly that she does take very seriously. So her absences are significant. But Buckingham Palace is going out of its way to make sure that people know she is doing OK. The 90-year-old monarch is up and about within her home on the Sandringham Estate in England. She is working, they say. She's still going through the paperwork and documents that she receives from government and those briefing papers that she must be across in her role technically as the British head of state.

But she's staying out of the cold winter weather as a precaution. And don't let these rare blue skies fool you. It is fair to say, I think, that Britain's winter weather is no place for anyone with a cold, let alone a 90-year-old. So she's doing OK. And she's battling through it. The palace wants everyone to know they shouldn't be overly concerned just yet.

ROMANS: You know, her husband is older than she is. He had also been suffering from that cold earlier around Christmas time. What do we know about his health? Did he go to -- did he go to church services?

BLACK: Yes, he seems to have bounced back much faster. The Duke of Edinburgh Prince Philip, the Queen's husband, made it to the Christmas service. He was seen yesterday again for the New Year's Day service. And he looked in sprightly good health, I think you'd have to say. So, as I said, we'll be looking ahead to next week's church service again near the Sandringham Estate to see if the Queen makes it there to get the next -- that's her next public appearance, if you like.

This time over the holiday period is generally personal time for the Queen where she spends time on the estate with her family, exploring the spectacular grounds and so forth. We know she's going to be there for the rest of the month, all the way through January, we understand. And as I say, we'll get the next indication of just how she is doing. Just the progress of her recovery next week when she's due at her next church service -- Christine.

ROMANS: All right. Phil Black, thank you so much for that in a bright, but chilly London this morning. Thank you.

BERMAN: All right. 2016 was the deadliest year in Chicago in nearly two decades. That's according to Chicago Police Department. There were 762 murders last year. The most in the city since 1997. Chicago also saw a surge in gun violence numbering more than 3500 shooting incidents and more than 4300 victims. Police investigated 27 shooting incidents, a dozen of which were fatal just in the last week of December. 2015 was Chicago's second bloodiest year since 1997 with 480 murders.

ROMANS: All right. The search is on for a vandal caught on surveillance video lending a little high comedy to the iconic Hollywood sign. It was altered to read "Hollyweed." Police say the prankster used tarps to change the O's in the sign to E's. It happened between the hours of midnight and 2:00 a.m. Authorities have since changed the sign back to its original form.

BERMAN: So serious initiative?

ROMANS: I was supposed to say some ambition that is for some reason surprised me. The ambition --

BERMAN: Also Doritos sales, which means, you know, midnight and 2:00 a.m.

ROMANS: They are now looking at the surveillance video of all of convenience stores around there. Whoever went in and bought $100 worth of munchies.

BERMAN: All right. Mariah Carey is blaming a malfunctioning ear piece for whatever happened on New Year's Eve. This was it.

(BEGIN VIDEO CLIP)

MARIAH CAREY, SINGER: All right. We didn't have a check of this song. So we'll just say it went to number one. And that's what it is. OK. Feels like --

(END VIDEO CLIP)

BERMAN: So you heard Carey say there that she did not have a sound check for the song. I'm not sure that that was the only issue. There may have been more than one issue there. That song was supposed to have been her '90s hit. I'm told it was a hit called "Emotions."

ROMANS: Stop. You know all the words to it.

BERMAN: A representative -- she doesn't apparently. A representative for the singer tells Billboard that production set her up to fail. CNN has reached out to Dick Clark Productions for a response to this.

ROMANS: It was a confusing moment. Everyone was talking about it this morning.

BERMAN: People are talking about Mariah Carey. The good news from Mariah Carey is she's back, back on the scene.

ROMANS: All right.

BERMAN: Quite an arrival.

ROMANS: Yes. I would say so. 49 minutes past the hour. Kim Jong-un says North Korea is close to testing an intercontinental ballistic missile. The details of the country's growing capability next.

(COMMERCIAL BREAK)

[04:52:57] ROMANS: Welcome back. North Korean leader Kim Jong-un ushering in the new year the way he knows best with some extra loud saber rattling. Kim took to the airwaves Sunday -- put the world on notice that Pyongyang is close to testing an intercontinental ballistic missile. What makes this threat different from previous threats and how is this playing in Washington and with North Korea's neighbors in South Korea?

CNN's Saima Mohsin live in Seoul with the latest. Certainly this is the leader getting some attention for himself to start the new year.

SAIMA MOHSIN, CNN CORRESPONDENT: Yes, absolutely, unequivocally, Christine. We've heard this kind of posturing and rhetoric before but this time, Kim Jong-un has said that he has been developing an intercontinental ballistic missile. That basically means that it's a minimum of 5,500 kilometers that it can reach potentially up to 30,000 kilometers. The kind of capability that Russia and the U.S. have.

Now of course when Kim Jong-un makes a statement like that, we have to sit up and listen. We know they have nuclear weapons. Two nuclear tests tested alone in 2016. The fifth and largest under Kim Jong-un's watch in September.

Now whether they have the ICBM capabilities, we simply can't independently verify. But what we do know is that in February 2016, North Korea launched a satellite. Now a lot of experts say that that is a template for launching a long-range missile -- Christine.

ROMANS: So how serious is the threat really? I mean, what are experts saying about whether they can do this?

MOHSIN: Yes, it's hard to tell really. We know, as I say, that they can launch a long-range missile. But the majority of tests apparently over the last few years, and I'm talking about missile tests in addition to the nuclear tests that we've been reporting on have apparently been short and medium-range tests that have been successful. The long-range missile according to the experts have not been so successful. The majority of them.

[04:55:03] But if Kim Jong-un is making this announcement that he is close to successfully testing them, then that means that we have to sit up and listen and we know that he wants to do this in 2017 when there will be a new president in the White House, President Donald Trump, where he believes that Washington, D.C.'s hands will be tied to take action against him -- Christine.

ROMANS: All right. Saima for us in Seoul this morning. Thank you so much for that.

Back here. Two Dakota Pipeline protesters making their voices heard at the Minnesota Vikings game. You can see they hang up a banner with #noDAPL. The pair also hung from what appeared to be repelling gear alongside their banners. Protesters were eventually arrested after officers got them to the ground.

The Vikings home is U.S. Bank Stadium. Protesters claim the financial institution has financial links to the controversial project. U.S. Bank declined to comment.

BERMAN: Security will stepped up today at the 128th Rose Parade that happens in Pasadena. 700,000 people from around the world will be taking part in the festivities. Local police are teaming up with agencies, including the Secret Service on the front line with Homeland Security. And one measure they are taking, which makes sense, they're going to set up water-filled barricades along the perimeter of the parade.

You see things like that here in New York City, too, where there are big construction trucks and servicing trucks there. The idea is to prevent, you know, any truck attacks or vehicle attacks in the likes of which we have seen in Europe.

ROMANS: All right. Let's get an EARLY START on your money this morning. Global markets are closed today for the holiday. The question on Wall Street, though, this week, will last year's rally continue into 2017? You know, it was a memorable run in 2016. The market recovered from one of the worst ever starts to a year to hit a series of record highs. The Dow up more than 13 percent for the year. Falling short of that elusive 20,000.

But I'll tell you, most people made money in the stock market last year. With the bull market on track to turn eight in March, many wonder if the so-called Trump rally maybe gotten ahead of itself.

We're not quite done yet with 2016, though. The final jobs report for the year will be released on Friday. We'll get the final read of just how jobs did.

BERMAN: It's like the 2016 hangover.

ROMANS: Yes. Exactly. But no hangover for the auto industry. It is on track for another record year just barely. Car sales last year could top 17.5 million new vehicles sold last year. This is a record of maybe about 10,000 vehicles. That will cap off seven years now of rising sales. Cheap gas, low interest rates have spurred buying. That same cheap fuel, though, has killed demand for small and midsized cars. It is pickup trucks and SUVs that make up about 60 percent of all car sales. How soon we forget.

Millions of the lowest paid workers just got a raise, by the way, on January 1st. 19 states in 21 cities. The biggest increase is Arizona. Minimum wage of 24 percent to $10 an hour. Some raises were minor. Several states jumped between a buck and two bucks. It may not sound like much but it could provide a full-time worker with another 80 bucks a week. So even though there's been no action at all on the federal minimum wage, you can see many of these states have taken it upon themselves to do so.

BERMAN: I would not expect federal action on minimum wage now.

ROMANS: No. I wouldn't either. That's for now.

BERMAN: All right. EARLY START continues right now.

ROMANS: President Obama defending his legacy as Donald Trump's team vows to repeal many of his key policies.

BERMAN: The president-elect says he knows things that other people don't. Donald Trump is questioning intelligence reports that the Russian government meddled in the U.S. election. What does he know and when will he tell us?

ROMANS: Breaking this morning. ISIS claiming responsibility for a terror attack in Istanbul. A manhunt now for the suspect. We'll tell you where the investigators think he might be.

All right. Good morning. And welcome to EARLY START. I'm Christine Romans.

BERMAN: Hello, everyone. I'm John Berman. Happy New Year. It is Monday, January 2nd. 5:00 a.m. in the East.

This morning President-elect Donald Trump, he has a secret. He's back in New York City for the first time in two weeks. This follows his vacation, two weeks long, at his Mar-a-Lago resort in Florida where he says he knows things the rest of us don't when it comes to the alleged Russian hacking into the U.S. election. And with 18 days to go before the inauguration, his team is promising to get to work fast reversing many of President Obama's policies. This was his spokesman, Sean Spicer.

(BEGIN VIDEO CLIP)

SEAN SPICER, WHITE HOUSE PRESS SECRETARY-DESIGNATE: On day one, he's going to sign a series of executive order to do two things. One is to repeal a lot of the regulations and actions that have been taken by this administration over the last eight years that have hampered both economic growth and job creation.

And then, secondly, do the same on a forward-thinking thing. He's going to start implementing things. He's going to bring a new brand to Washington. He's going to institute a lobbying ban, five years. It's very forward-thinking.

(END VIDEO CLIP)

BERMAN: Sean Spicer did not specify exactly which executive actions and regulations that the President Trump will repeal. One of the big questions this morning is what will Mr. Trump do or not do regarding Russian hacking. Will he keep the Obama administration new sanctions in place? Well, this might depend on his secret information.

CNN's Ryan Nobles has the latest from Washington.

RYAN NOBLES, CNN CORRESPONDENT: John and Christine, President-elect Donald Trump will have a busy start to the new year.